Come November 15, 2010 and mutual fund companies will start rejecting your mutual fund application, in case the cheque is not from investor’s bank account (third party cheque).
This is to stop all fraud activities by agents and distributors. There has been some complaints in past on this where some of the agents were using cheques provided by their investor clients, to invest into mutual funds account owned by them. So most of the AMC (asset management company) have taken this action now.
AMFI (Association of Mutual Funds in India) has issued best practice guidelines in a circular to all Mutual fund companies not to accept third party cheques in future.
There also some exception to this, where a parent invest on behalf of minor or an employer does it on behalf of its employee (SIP through payroll deduction).Also in case of these exceptions also, these payments should also be ensured to be coming only from investor’s authorized entities and KYC (Know your customer) complaint persons . Moreover they will have to verify fund sources to ensure that funds are actually coming from the investor’s account.In case of online payments through RTGS, NEFT or ECS, application must have a instruction included from investor to bank.